August 17, 2017

331 Shell Companies- Many Calcutta Stock Exchange Listed

Calcutta Stock Exchange

The capital markets regulator last week imposed trading restrictions on 331 companies listed with stock exchanges after they were identified as shell, based on inputs of several agencies such as the income tax department and the Serious Fraud Investigation Office.

It was found that around 145 of these companies were registered in Kolkata.

Shares of several of these companies were once traded on the Calcutta Stock Exchange (CSE), which effectively collapsed after brokers defaulted in March 2001. The investigation that followed in the Rs120-crore payment shortfall exposed serious deficiencies in market surveillance.

Surveillance tightened, trading in frontline stocks shifted from CSE within months to the Mumbai-based bourses with better liquidity.

Trading at CSE plummeted to a trickle, threatening its survival.

Still, some shares continued to be traded only on CSE until in 2013 the securities market regulator ordered the exchange’s trading platform to be wound up.

Sub: Action against Exclusively Listed Companies and its Promoters/Directors pending Exit Offer to the Shareholders

1. SEBI vide circular dated October 10, 2016, provided options to the Exclusively Listed Companies (“ELCs”) on Dissemination Board (“DB”) to raise capital for meeting the capital requirement for getting listed on the nationwide stock exchanges or to provide exit to investors. An exit mechanism for investors in such ELCs was also specified in the aforesaid circular. Further, ELCs were required to furnish the plan of action by January 09, 2017 to the Designated Stock Exchanges (DSEs), which was subsequently extended till June 30, 2017.

Such ELCs and the Depositories shall not effect transfer, by way of sale, pledge, etc., of any of the equity shares and the corporate benefits such as dividend, rights, bonus shares, split, etc. shall be frozen, for all the equity shares, held by the promoters or directors of non-compliant Exclusively Listed Companies till the promoters of such non-compliant Exclusively Listed Companies provide an exit option to the public shareholders in compliance with SEBI circular dated October 1